Startup advocates spar with French minister over job laws

Entrepreneurs at the LeWeb tech conference tell minister Arnaud Montebourg that the country is discouraging entrepreneurs and holding back employment. He responds, "We are not California. We are French."

Arnaud Montebourg, head of France's ministry for industrial renewal, tangles with venture capitalists over French laws that, they say, hurts innovation.
Stephen Shankland/CNET

PARIS -- A French minister went behind enemy lines Thursday, defending his government's policies that critics said keep startups and high-tech companies away from the country.

The LeWeb conference here unabashedly celebrates startups, venture capitalism, and technology disruption, bringing some of the Silicon Valley ethos across the Atlantic. And several participants were keen to vent their frustrations to Arnaud Montebourg, the minister for industrial renewal.

The tension between business and government came up again and again, in part because it's a pet issue of entrepreneur, conference founder, and host Loic Le Meur, who has lived in both the San Francisco Bay Area and France. One particularly thorny issue: laws that protect employees, assuring 18 months' pay in the event they get laid off, make companies unwilling to assume the burdens of hiring them in the first place.

Clara Shih, founder and chief executive of Hearsay Social, had a message she said Le Meur could deliver to Montebourg: "You should tell him to make it easier to hire and fire," she said. "It would be helpful for employers...to have more flexible labor laws, because then we would be more aggressive about hiring."

When Le Meur delivered the message, with reinforcement from Jeff Clavier founder and managing partner of SoftTech Venture Capital, Montebourg said things are different here.

"We are not California. We are French," Montebourg said. "We have a tradition to help people, to protect people. The question for us is to find a good balance between protection and what you need."

Clavier wasn't buying it. More flexibility would mean more jobs, he said.

"The reason we create so many jobs in California and have such low unemployment is that we can contract with or get rid of people as we need to, if they don't perform or as economic issues arise. The point is that we create the jobs first and then contract afterwards as opposed to thinking for 12 or 18 months whether we can afford to hire one more person."

He also said French capital-gains taxes are too high, which eat into the profits that venture capitalists such as himself make when selling a company. And he objected in particular to Montebourg's actions to scuttle Yahoo's attempted acquisition this year of DailyMotion, a French video site. DailyMotion is owned by France Telecom mobile network operator Orange, in which the French government owns a stake. Watching the government block the takeover sends a message to non-French companies that might seek investments in or acquisitions of French companies: don't bother, because if you're an investor, the government might stop you from getting your money back out when it's time to sell a startup.

Again, Montebourg bridled at the idea.

"This is our sovereignty to choose what deal we want to make," he said. "That was not a good deal, because Yahoo -- we had mistrust. Yahoo had killed many startups they had bought before. The strategy was not to kill any kind of deal. We wanted a good deal. My proposal to the No. 2 of Yahoo was to say 50-50. They said, no, we want to eat DailyMotion."

Clavier insisted that the episode still sent the wrong message. "What we heard is you have a great startup in France, and the government will get in the way of an M&A," Clavier said, referring to mergers and acquisitions.

"You won't convince us to come back," Clavier said. "We're just trying to help you to keep your entrepreneurs."

Le Meur also pushed Montebourg on the issue of car-service startup Uber, which is facing the prospect of proposed French legislation that would require a 15-minute delay between when a person ordered a car and when the car is actually permitted to pick up the passenger. Uber strives to get a car to a passenger within five minutes. French taxi drivers don't like Uber, but the law would protect them against some of its competition.

Entrepreneur and LeWeb conference organizer Loic Le Meur tries on two sets of Google Glass at the conference.
Stephen Shankland/CNET

But Parisians want their taxis to arrive in five minutes. So, Le Meur asked, doesn't the law actually "go against your own people?"

Again, Montebourg called for balance. "We have to change slowly to help people understand that the world is changing," Montebourg said.

Le Meur said protecting industries against new competitors, though, also curtails creativity in business.

"The problem here is that countries around us see this as trying to slow down startups," Le Meur said. "You're penalizing the startups. They try of course to disrupt systems. That's how they grow. The image of France is that it's the country where they try to slow you down to protect the past."

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Stephen Shankland has been a reporter at CNET since 1998 and covers browsers, Web development, digital photography and new technology. In the past he has been CNET's beat reporter for Google, Yahoo, Linux, open-source software, servers and supercomputers. He has a soft spot in his heart for standards groups and I/O interfaces.
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